Sunday, November 9, 2014

Economics, History and Economic History, Misread

My curmudgeonly moment today is devoted to the latest issue of The Nation, which has published a review article by Timothy Shenk on several recently released books on the history of capitalism. A standard complaint is that the author you’re criticizing has managed to make so many errors in so few lines, but Shenk’s review is bloated and circles endlessly around very little substance, so perhaps his ratio is more commonplace. Still, the errors were annoying.

Unless you have too much time on your hands you won’t want to read the original, so here’s a short synopsis. According to Shenk, economists and historians used to be cut from the same cloth, but they diverged in the twentieth century as economics became more technical and history more cultural. Historians abandoned economics, and economists were interested only in issues related to national policies and economic growth. Now a new cohort of “historians of capitalism” are boldly defining a sphere in which historians can explore the grand issues that economics has abandoned. But the historians have identified capitalism as economic growth. This has helped them make sense of institutions like slavery that were formerly seen as outside the capitalist penumbra, but it is problematic in other respects. Economists and ecologists now agree that rapid growth is over, perhaps growth itself, so the new direction these historians are taking is of little value for the future.

I often resort to lists in these posts because I don’t have time to craft a proper essay that knits everything together. It’s the same today.

1. Economic history as a subfield of economics has been ill-treated by the profession, but it has continued unabated. What about Douglass North? Cliometrics? Business history? The current fascination with the longue durée in economic life? The history of finance? Economic history is a massive enterprise and has asked every sort of question, large and small.

2. And historians never stopped debating the origins and meaning of capitalism. There has been a vigorous literature on how to explain the divergence of Europe from the less dynamic trajectories of India and China in the early modern era and intense disputes over the evolution of living standards during the industrial revolution. A lot of environmental history is also transparently a history of capitalism. So also the history of science and technology. So where does this idea that historians dropped the study of capitalism come from?

3. According to Shenk, the 1960s gave history its radicals committed to bottom-up narratives and economics its Friedmanites. Actually, economics got its radicals too but had little institutional space for them. And the market fundamentalists surged in the 1970s and ‘80s for largely unrelated reasons.

4. Normal long run per capita economic growth under capitalism is a modest 1-2%. There are temporary exceptions in miracle economies and miracle decades, but the point Piketty and others are making is that mature capitalist economies should expect to see slow rates of growth in the future, as they had in the past. Secular stagnation adds slower technological change and demographic transition to the mix. The first is supply-side and the second results from demand since, as a population ages, its rate of investment falls.

5. Secular stagnation has nothing to do with the Malthusian fantasies of some parts of the environmental movement. One could be true and the other false, or maybe they are both false. Shenk’s reference to the end of “unlimited” economic growth gives away his confusion: economic growth is always limited by a wide range of factors including the cost of material inputs. I’ve gone after the degrowth thing elsewhere and won’t take it up now, but I do want to register a complaint about the notion that the expectation (and fear) on the part of some economists that future economic growth will be sluggish has some connection to environmental beliefs that growth and ecological responsibility are incompatible. They stem from completely different concerns, and they view growth in completely different ways.

It’s a sign of the times in the US that a house organ like The Nation has so few articles by economists and prints long (and I do mean long) pieces like this one about economics with no apparent fact-checking.

Incidentally, I’m interested in the books under review and would love to read something that discusses what they have to say.

3 comments:

On Peter's point #1 here's something by Peter Temin:http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2274908

On the Peter's wish to read something else about the books under review, Eric Foner has a review of Baptist's book http://www.nytimes.com/2014/10/05/books/review/the-half-has-never-been-told-by-edward-e-baptist.html

Friedman's most important and influential papers were published in the 50s, and he became an important figure in the profession in that decade. it is true that he came to be more widely known among the public in the 60s after he published Capitalism and Freedom in 1961 and got a Newsweek column, but he was an important influence within the profession frmo the 50s on.